Combined reporting: two contributions

Behind the horrible-sounding name Unitary Taxation with Formulary Apportionment hides a simple principle: that governments should try to tax multinational businesses not according to the legal fictions into which those firms' accountants contort themselves, but according to the real economic substance of what they do and where they do it. (Read more about this here.) Others use the friendlier term 'combined reporting,' and that is the title of a new study produced by William F. Fox and LeAnn Luna of the Center for Business and Economic Research, University of Tennessee, Knoxville. It looks at the experience of how combined reporting approaches have fared in terms of the ability of individual U.S. states to tax multi-state corporations.

We won't describe the paper in any detail; we are just publishing this as a pointer for those interested in researching this issue. The paper needs to be read in conjunction with this testimony by Michael Mazerov, who counters some of the claims made in the Fox/Luna paper. (For further background, see also Michael J. Mcintyre's paper The Use of Combined Reporting by Nation-States.)

We will post these permanently on our transfer pricing page.